Credit Improvement Series 2 of 2
In the first part of this series, we talked about what not to do. Now, here are some things that are a good look for your credit. At one point or another we have struggled with our finances. Now we know how important it is to have a good score. If you look around the store to see if they have any photos of you hanging up, when applying for credit these
2 improvement articles are for you.
While it sounds easy to achieve “Good” score, some of the things that help increase our score are not that obvious. I hope by the end of this post, you have more clarity on what it takes to improve or maintain your score.
Don’t Be Late
The first and most obvious tip is, make payments to your accounts on-time AND in full (as much as possible). Payment history is by far the largest factor that goes into determining your score.
If your finances are not quite right this month, remember, late payments aren’t reported until they are 30 days late. I don’t encourage! Avoid paying late if possible. Your creditor becasue will still charge you a late fee. To clarify, if you do not make the entire payment due, the portion left unpaid will be reported as a late payment. “Putting $20 on it” is not going to stop that payment from being late.
Control Your Spending
No more than 30%
Maintaining a balance of no more than 30% of the total credit line across all your accounts. Some of you may remember that this percentage was 50%. Since the financial crisis, creditors have been a little gun shy about extending credit. So while you may have been paying all of your accounts timely, maintaining high balances will negatively impact your score.
Aged Like Fine Wine
Work towards having a lengthy credit history
Creditors like to see that you have been able to maintain good relationships with other creditors for long periods of time. As we get older, we open new accounts and close accounts that are no longer in use. If you have older accounts that you have paid off, do not close them. To ensure these accounts remain open once they have been paid, you have to continue to use them. The balances shouldn’t be large, but activity on the accounts is key, or account closure can happen in as little as 6 months.
Too Many Accounts!
Not too much now!
Limit the number of credit accounts with balances and the amount of these balances. 5-10 accounts with manageable balances looks like you use and manage your finances efficiently and responsibly. If you have 20 accounts and they all have balances, it looks like you’re financing every aspect of your life.
Creditors view credit cards as short term loans, meant to be paid off and used again as needed. That is why they are known as revolving accounts. They are not designed to maintain a balance for years on end while only paying the minimum balance. #dontdothat
Mix It Up
Diversity counts for more than affirmative action
The type of accounts that you have and have managed successfully is important. Creditors want you to have cards, a mortgage, a car loan, student loans, etc… You have to manage multiple types of accounts and give creditors confidence about extending credit to you. See things creditors look for (here).
Smells like success to me! We all need to be able to maintain a high score going forward.
To sum it up:
- Pay on time and in full
- Keep your balances under 30% of your available limit
- Make sure your older accounts remain open
- Don’t have too many accounts with balances
- Have a variety of accounts
Final Thought, For real this time
Some of these tips may be difficult at first. If you had enough money to pay all your balances down to 30%, you would have done it by now.
I can teach you what you need to know to improve your financial situation. I want financial freedom to be a reality for you! Join the GFM family and let’s make this financial journey together.
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